China is seeking compensation of US$3 billion from Ukraine for the breach of a loans-for-grain contract signed in 2012, Russian media reported yesterday.

Under the deal, the Export-Import Bank of China provided the loan to Kiev in exchange for supplies of grain.

Citing a Ukrainian parliament official, the ITAR-TASS news agency reported that the State Food and Grain Corporation of Ukraine has used part of the US$3 billion Chinese loan to instead provide crops for other countries and parties, including Ethiopia, Iran, Kenya and Syrian opposition groups.

So far, Chinese importers have only received US$153 million worth of Ukrainian grain, or 180,000 tonnes, the report said.

The report was carried by the Chinese-language service of The Voice of Russia radio. There has been no official comment from China Exim Bank on the report.

The Ukrainian parliamentary official said China has already lodged a case against Ukraine at the London Court of International Arbitration. The report did not mention the date or any further details on the case.

In March, the Worldwide News Ukraine news agency reported that the first half of the Chinese loan was delivered to Kiev, and Ukraine planned then to export four million tonnes of grain last year.

The loan contract stipulated the supply of Ukrainian grain over 15 years. The annual volume of grain exports would vary but would not exceed six million tonnes a year.

The Ukrainian parliament would provide state guarantees for the loan-for-grain contract, the report added.

China has stepped up agricultural co-operation with Ukraine in recent years. The Xinjiang Production and Construction Corps said last year it had reached an agreement with KSG Agro, a leading Ukraine agricultural company, on a 50-year programme to secure produce from three million hectares of Ukrainian farmland for Chinese consumers.

But KSG later denied it was "selling" any land to any Chinese companies, and that the agreement was a "letter of intent" concerning a transfer of irrigation technology from Xinjiang.

This article appeared in the South China Morning Post print edition as China sues Ukraine for breach of grain deal